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Dow 30 Stock Roundup: JPMorgan Ups Dividend, Disney's ESPN+ Hits 1M Paid Subscribers

Natural Gas and Energy: 2 ETFs to Watch on Outsized Volume
UNG and PXE saw massive trading volumes in yesterday's session.

The index made strong gains this week as investors shrugged off trade tensions. Trump’s decision to impose fresh tariffs on $200 billion of Chinese imports did weigh on investors. But the recent raft of positive economic data helped investors focus on broader fundamentals. Financials gained after yields on U.S. government bonds surged substantially. Tech majors also defied tariff worries to post strong gains.

Last Week’s Performance

The index gained 8.68 points last Friday as gains in financials following a spike in 10-year U.S. Treasury Note yield was mostly offset by news that President Trump has given a go ahead to imposition of $200 billion of fresh tariffs on Chinese goods.

On Sep 14, the yield on benchmark 10-year U.S. Treasury Note hits 3% for the first time since Aug 2. Expectations of higher economic growth in the third quarter of 2018 were the primary reason for the hike in government bond yield.

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The index gained 0.9% over last week. Wall Street performed impressively in the second week of September. Moreover, the CBOE VIX – Wall Street’s preferred gauge of volatility – declined nearly 19% over the week, marking its biggest weekly drop since April.

Strong economic data like industrial production, capacity utilization, import price index, initial claims and U.S. consumer sentiment restored investor’s faith in risker assets like equities. Strong economic fundamentals helped market participants to largely ignore the ongoing trade conflict between the United States and China.

The Dow This Week

The index lost 0.4% on Monday, ending its four-day long winning streak. The lingering trade conflict between the United States and China escalated once again. Investor confidence remained dented significantly following reports that Trump would announce fresh tariffs on Chinese imports.

Meanwhile, the Chinese government has indicated that fresh round of U.S. tariffs will put upcoming U.S.-China trade negotiations in jeopardy, compelling China to retaliate step by step.

The index gained 0.7% on Tuesday reversing the previous day’s losses as investors shrugged off trade war jitters. Elimination of around 300 items from the list of Chinese products initially targeted by the Trump administration’s latest tariffs boosted investor sentiment. Additionally, a measured response on the part of China lifted confidence of market participants.

The index increased 0.7% on Wednesday lifted by the financial sector on the back of record high yields in U.S. government bonds. However, lukewarm performance by the technology sector somehow marred the market rally.

On Sep 19, the yield on benchmark 10-year U.S. Treasury Note reached 3.081%, its highest since May 17. Moreover, yield on short-term 2-year U.S. Treasury Note crossed 2.8%, its highest level since 2008.

The index gained 1% to close at a record level as encouraging economic data helped to negate trade tensions. The rally was powered by blue-chips with only two of the 30 Dow components closing in the red.

Coming to bullish economic data, jobless claims declined by 3,000 last week to their lowest level since November 1969. Meanwhile, the Philadelphia Fed manufacturing index increased from 11.9 to 22.9 in September, exceeding expectations. Existing home sales remained flat at 5.34 million for August.

Components Moving the Index

JPMorgan Chase & Co.’s JPM board of directors has announced a 42.9% hike in its quarterly dividend. The revised dividend of 80 cents per share will be paid on Oct 31 to shareholders of record as of Oct 5. Based on the last day’s closing price of $114.30 per share, the dividend yield is 2.8%.

The hike comes as part of the company’s 2018 capital plan which was approved by the Federal Reserve this June. Additionally, Zacks Rank #3 (Hold) JPMorgan’s capital plan includes authorization to repurchase $20.7 billion worth of shares, through the second quarter of 2019.

Since 2011, JPMorgan has been raising its dividend annually. From paying 5 cents a share as quarterly dividend during the financial crisis, the company has come a long way in terms of its capital strength. Prior to this hike, it had raised its dividend by 12% to 56 cents per share in September 2017. (Read: JPMorgan Cheers Shareholders With 43% Dividend Hike)

The Goldman Sachs Group’s GS investment management subsidiary, Goldman Sachs Asset Management (“GSAM”), is purchasing government debt from Turkey and Argentina as it finds these markets capable of offering more profitable bond trades in 2018. The news was reported by Bloomberg. Goldman Sachs has a Zacks Rank #3.

Philip Moffitt, head of fixed income in Asia-Pacific region, noted that GSAM has acquired an overweight position in the dollar bonds of these emerging markets. He reasoned that though due to some “dysfunctional, local political events” in these regions investors are selling these notes, they still have the potential to fund themselves.

Moffitt remains confident of their balance sheets and believes that even Turkey, despite its political backdrop, retains the ability to fulfill interest obligations. Further, he shared his view on the euro and dollar strength. (Read: Goldman's Asset Management Unit Buys Turkey & Argentina Debt)

Microsoft Corporation MSFT recently acquired Lobe, a startup based in San Francisco, CA. However, the terms of the deal have been kept under wraps. Notably, this buyout adds to Microsoft’s growing number of AI-based acquisitions.

Lobe leverages AI to offer a visual drag-and-drop interface which allows users to develop deep learning (DL) tools. The interface is enabled to predict outcomes based on data inputs from microphones, cameras, among other mechanisms.

Lobe will continue to function as a standalone entity under Microsoft’s umbrella. The stock has a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Walt Disney Company’s DIS shares popped 1.7% on Sep 20 following news that its ESPN+ streaming service reached over one million paying subscribers. This announcement from the struggling sports media giant led to a boost in the stock, but the new stand-alone ESPN streaming service's growth since its April launch is also a sign that Disney’s streaming future looks secure.

ESPN announced on Sep 20 that its streaming service, which isn’t tied to any cable packages, surpassed one million paying subscribers. Zacks Rank #4 (Sell) Disney launched ESPN+ in April at a $4.99 per month price point ($49.99 per year) to some skepticism.

The streaming service doesn’t feature ESPN’s premier content, such as Monday Night Football, NBA basketball, or big-time college football and basketball. These high-profile offerings will likely be available down the road when ESPN and its various partners work out what to do as linear TV continues to suffer. (Read: Disney's Streaming Future Looks Strong as ESPN+ Hits 1 Million)

Pfizer Inc. PFE announced positive top-line data from a phase IIa study evaluating its JAK3 inhibitor candidate, PF-06651600, and tyrosine kinase 2/JAK1 inhibitor, PF-06700841, as a treatment for moderate to severe alopecia areata (“AA”). Pfizer has a Zacks Rank #3.

Both the candidates met the primary endpoint of improving hair regrowth on the scalp compared to baseline over 24 weeks of treatment. Data from the study was presented at the European Academy of Dermatology and Venereology Congress, which was held in France.

The FDA granted Breakthrough Therapy designation to PF-06651600 based on these data earlier this month. (Read: Pfizer's Skin Disease Candidates Positive in Mid-Stage Study)

Visa Inc. V, Mastercard MA, along with banks including JPMorgan, Citigroup C and Bank of America BAC would pay merchants about $6.5 billion on account of Payment Card Interchange Fee and Merchant Discount Antitrust Litigation.

The said litigation is a U.S. class-action lawsuit filed in 2005 by merchants and trade associations against Zacks Rank #3 Visa, MasterCard, and numerous financial institutions that issue payment cards. The suit was filed due to price fixing and other allegedly anti-competitive trade practices in the credit card industry. (Read: Visa, Mastercard to Settle U.S. Merchant Litigation)

Performance of the Top 10 Dow Companies                        

The table given below shows the price movements of the 10 largest components of the Dow, which is a price-weighted index, over the last five days and during the last six months. Over the last five trading days, the Dow has surged 2.1%.

Next Week’s Outlook

With investors choosing to brush aside trade tensions, stocks have made strong gains over the week. Yields on government bonds have also surged, helping financials gains substantially. Tech majors have also remained unaffected by the Trump administration’s decision to impose fresh tariffs.

Several key economic reports are lined up for release next week. These include data on consumer confidence, personal spending and the all-important report on GDP. If most of these are positive in nature, stocks could continue to move higher in the week ahead.

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Bank of America Corporation (BAC) : Free Stock Analysis Report
 
JPMorgan Chase & Co. (JPM) : Free Stock Analysis Report
 
Citigroup Inc. (C) : Free Stock Analysis Report
 
The Walt Disney Company (DIS) : Free Stock Analysis Report
 
Pfizer Inc. (PFE) : Free Stock Analysis Report
 
Microsoft Corporation (MSFT) : Free Stock Analysis Report
 
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Visa Inc. (V) : Free Stock Analysis Report
 
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